Credit data for March shows that households in South Africa are coming under increasing pressure and losing confidence in the economy, Nedbank says.<\/p>\n
Analysing broad money supply and credit extension data for the month, the finance group noted that indicators surprised on the downside, bogged down by a weak economy and sharply higher interest rates.<\/p>\n
“Growth in broad money supply slowed to 8.9% yoy in March, down from 10.8% in February, and well below our expectation of a slight moderation to 10% and the consensus market forecast of a slowdown to 9.9%,” it said.<\/p>\n
The drag came from a R54.2 billion decline in net foreign assets and a much smaller increase in claims on the private sector of a modest R9.5 billion.<\/p>\n
Net claims on the government sector and net other assets increased by R64.9 billion and R18.9 billion after contracting sharply in February, it said.<\/p>\n
Household pressure<\/strong><\/p>\n In the household market, Nedbank said the downward pressure came from slower growth in home loans, which account for 58.8% of all loans extended to households.<\/p>\n Home loans grew by 6.6% yoy, down from 6.9% in February and 7% in January. Personal loan growth \u2013 the third largest category, accounting for 14.3% of total advances – also moderated to 9.1% from 10%.<\/p>\n “The slowdown reflects fading consumer confidence, weaker household finances and sharply higher interest rates. The softening in personal loans probably reflects tighter lending standards among major banks in response to higher default rates, which also points to mounting financial stress among households in this market segment.”<\/p>\n These sentiments were recently expressed by both Capitec<\/a> and Standard Bank<\/a>, which noted an increase in credit impairments in their respective datasets.<\/p>\n Capitec’s numbers were especially worrying, with impairments up 80% year on year. The bank has a client base of over 20 million people, giving it an extensive view of the financial health of South Africans. It has 1.3 million credit customers.<\/p>\n The group noted that costs are rising, but salaries and other income are not increasing to match, leading to more customers turning to credit to make it through the month. This, in turn, has led to more defaults and impairments cropping up.<\/p>\n According to Nedbank, household demand for transactional credit is mixed.<\/p>\n The group noted that households are cutting back on overdrafts<\/strong>, which slowed sharply to 3.1% yoy from 8.1%. However, consumers continue to rely heavily on credit cards<\/strong>, which grew at a still robust 8.4% in March, down only slightly from 8.9% in February and January.<\/p>\n “Credit growth remains reasonably healthy despite the sharp deterioration in underlying economic conditions due to relentless power outages and much tighter monetary policy. Even so, the credit cycle has turned down, peaking in the third quarter of last year,” the bank said.<\/p>\n The slowdown is expected to intensify during the remainder of this year and into the early part of next year.<\/p>\n “Household demand will likely weaken significantly, given the mounting pressure on personal incomes and the sharp rise in the cost of credit. The corporate market is also expected to soften.<\/p>\n “While demand for financing will be propped up by the need to secure alternative sources of electricity and the flurry of renewable energy projects, the anticipated loss of economic momentum will eventually undermine corporate profitability and weigh down credit demand. The risk to the forecast resides on the downside.”<\/p>\n
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